During the latest webinar in the Navigating the New Energy Landscape series, PartnersCarl FlemingandJames Salernowere joined by guestEli Davis, executive director of the Energy Group at National Australia Bank, for a discussion on the current renewables debt financing market and how it will be impacted by the Inflation Reduction Act of 2022 (IRA).
Key takeaways included:
- As a result of recent trends in the banking industry, sponsors are now paying closer attention to defaulting lender provisions and which lenders are participating in their lender groups.
- There is uncertainty in the debt market regarding whether lending amounts will increase to the amounts banks were lending prior to recent market volatility.
- Deal flow in the renewables sector is trending upward. Project finance remains a robust industry while banks remain active despite recent market instability. Banks are actively looking to invest in projects in the environmental, social and governance area.
- The market is beginning to transact around transferability in several ways. Lenders are becoming comfortable with structures that include (1) providing leverage against uncontracted credits and (2) tax equity investors who are purchasing several years' worth of credits upfront at a discounted rate.
- Due to the current lack of tax equity, McDermott is leading several deals that range from traditional tax equity joint venture (JV) structures and hybrid JV plus transferability structures to pure transferability structures, and each is allowing developers to continue to monetize tax credits and obtain financing.